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McKinsey Says Social Media Could Add $1.3 Trillion to the Economy

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McKinsey Says Social Media Could Add $1.3 Trillion to the Economy

By Quentin Hardy July 25, 2012 6:00 pmJuly 25, 2012 6:00 pm

And you thought Facebook’s valuation was big.

McKinsey Global Institute, the research arm of the business consulting giant, has just published a lengthy study on “unleashing value and productivity through social technologies.” The short version is that things like improved communication and collaboration from social media in four major business sectors could add $900 billion to $1.3 trillion in value to the economy.

The value is mostly through added productivity. Improved consumer focus as well as better-functioning teams are two other benefits. That is a great big number, likely to attract attention. McKinsey last did that in May 2011, with a report that said that by 2018 the United States could face a shortfall of 1.5 million data analysts and managers able to cope with the flood of data in their businesses.

The report adds credence to a recent flood of social media acquisitions from companies like Oracle, Salesforce and Microsoft. Big companies with large corporate customers have been spending billions on everything from better ways to manage how customers view them in chat rooms to internal communications software that looks and works like Facebook.

Social technologies like wikis, broadly accessible instant messaging, content searches and user forums, McKinsey says, are particularly effective among so-called interactions workers. These people are general managers, for example, but also consultative sales representatives, engineers working with teams to figure out new products, or health care workers personally figuring out patients’ needs.

Since they work with a lot of autonomy, but also in consultation with others, interactions workers benefit the most from knowing such things as which employees have the deepest knowledge in certain subjects, or who last contributed to a project, and how to get in touch with them quickly.

“The industries with the highest percentage of interactions workers have the highest spread of profits per employee,” said Michael Chui, one of the authors of the report. “It’s low in mining, but can vary by nine times more in banking. If you can make these people more effective, you can make the biggest difference.”

There are challenges to using social media effectively, the report says, and it could take years to put these productivity tools in place correctly. The main challenges are organizational and personal, as managers have to develop nonhierarchical cultures, where data and knowledge are exposed and shared, not hoarded.

“These technologies are successful when influential people are role models, using them and explaining them,” Mr. Chui said.

Uh-oh: once again, no matter how good the machines, people still have to be good, too. And that remains no simple matter.